## Greeks: Delta Question Pristine Options Quiz 1 Q.18 PRM pape

ameyakukde
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Posts: 29
Joined: Thu Aug 02, 2012 11:55 am

### Greeks: Delta Question Pristine Options Quiz 1 Q.18 PRM pape

A bank has sold \$300,000 USD of call options on 100,000 equities. The equities trade at 50, the option strike price is 49, the maturity is in 3 months, volatility is 20%, and the interest rate is 5%. How does it the bank delta hedge? Round to the nearest thousand share.

I have used d1= (ln(S0/k)+(r+(sigma^2)/2))/(sigma*sqrt(T))

I get d1= 0.902 and N(d1) is N(0.90)+0.2(N(0.91-0.90)

which is 0.815954. How is delta=0.65 then?

ameyakukde
Good Student
Posts: 29
Joined: Thu Aug 02, 2012 11:55 am

### Greeks: Delta Question Pristine Options Quiz 1 Q.18 PRM pape

Sorry, i missed out on the formula. Got the correct answer. Thanks, ignore this question. Is there no option to delete a thread?

Also, if the no.of days to maturity in a Black Scholes Model question are given as, say, 41. Then what should be the denominator? 365 or 250 i.e. calender days or trading days to calculate the price of the option?